Expert: Shirley McAllister, CPP, PHR - 5/16/2010

Question
Hi Shirley,

We own a small business.  Our employees are currently hourly however our financial advisor suggested perhaps having them become salary.
Is it possible to have employees be on salary (based on a 40 hour work week) and if they work more than 40 hours - is it possible to pay them an hourly rate for the amount over 40 hours?
Our employees usually work over 40 hours a week, but if they work less, can we adjust the salary to reflect that?  
Also, how does the salary option work when the employees take a day off (can we subtract that portion of the earnings)?  

Sincerely,
Marie

Answer
You can pay them salaried if they are hourly non exempt. You still must pay overtime for all hours over 40. You are simply paying a salary to hourly employees. It is not a recommended way of payment.

You cannot play hourly employees as salaried exempt which is exempt from overtime unless they meet the exemption criteria set out in the Fair Labor Standards Act. If you do and the department of labor finds out they are misclassified you will be penalized, fined and have to go back and pay the back overtime to the employees.

Shirley